(Bloomberg) -- Exchange-traded fund investors who placed record bets on the US technology space last week are getting crushed Monday as anxiety over competition from a Chinese startup’s AI model is hitting tech stocks hard.
Traders piled into an ETF that tracks twice the daily returns of the Nasdaq 100 at the fastest pace ever last week, driving a net inflow of $847 million into the ProShares Ultra QQQ ETF (ticker QLD). The bet is faring poorly so far, as the $8.2 billion fund dropped 6.3% Monday morning in New York.
A wide array of tech stocks from the US are sinking on news that the latest AI model from a Chinese artificial intelligence startup could challenge costlier AI models being developed by mega-cap tech companies.
The news is threatening the dominance of the US tech stocks that traders have gleefully bid up in recent years. Last week was no exception, with the biggest Nasdaq 100 ETF taking in over $2 billion.
Investors also piled into the VanEck Semiconductor ETF (ticker SMH) at the fastest pace since 2022, adding over $1 billion to the fund that boasts Nvidia Corp. and Broadcom Inc. among its top holdings. That ETF is down almost 10% in late morning trading in New York on Monday.
“Sector flows, whether the last week or last few months, have largely been ‘all-in’ on tech,” said Todd Sohn, an ETF strategist at Strategas. “It seems like expectations are too high and that is manifesting itself to some extent now.”
Not every ETF trader has been caught wrong-footed Monday. Investors had shied away from a fund that gives ultra-short exposure to tech stocks since the beginning of the year. But last week, the fund drew new cash. The $2.1 billion ProShares UltraPro Short QQQ (ticker SQQQ), which tracks three times the inverse daily return of the Nasdaq 100, took in roughly $230 million last week, its best week of flows all year. The fund is up 9% Monday.
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